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Fee arbitration is a process established by the New Jersey Court Rules, more particularly, Rule 1:20A. It is a process by which a client, and only a client, may request arbitration to resolve a fee dispute with his or her attorney. While a corporation may not file for fee arbitration, a person may file on behalf of the corporation if he or she is willing to take responsibility for the action.

Fee arbitration allows for a relatively informal forum for hearing and resolving attorney fee disputes. It is relatively inexpensive and usually exceedingly more expeditious than civil litigation.

All disputes are heard by a panel of the members of a district arbitration committee appointed by the Supreme Court of New Jersey. Most districts encompass only a single county. Disputes involving $3,000 or more are heard by a three-person panel of two attorneys and one non-attorney. Matters involving less than $3,000 are handled by a single panelist, who must be an attorney.

Beginning the Process

An attorney may not file suit to recover fees from a client until 30 days after giving the client notice explaining his or her rights to challenge the charges under the fee arbitration rules. Once this pre-action notice is given, and 30 days have passed without a request by the client for arbitration, the attorney is free to file suit. The complaint must state that notice of the arbitration rules was given to the client.

Should the client choose to seek fee arbitration with the 30-day window, the process begins when he or she files a formal request with the fee arbitration secretary in the county where the attorney's office is located. The attorney will receive a form response which must be completed and returned to the secretary promptly, along with the appropriate filing fee. Once this task has been completed, a hearing will be scheduled by the assigned panel chair.

Attorneys should be aware of the fact that once a client begins fee arbitration process, the attorney will be bound by the determinations of the fee arbitration panel, regardless of whether he or she participates.

A Question of Jurisdiction

The panel has jurisdiction over all attorneys who charge fees. A client may or may not choose to use fee arbitration, but once a client's filed request is 30 days old, the committee has jurisdiction over all parties and the client loses the right to withdraw the request.

There are exceptions to this rule. For example, the committee does not have jurisdiction to overrule a judicial determination. Exceptions to the committee's jurisdiction generally concern court awards of counsel fees for estates, arbitrations, and the like. When an exception applies, the secretary should reject the request before it is filed and leave any questions to the courts.

There is a limitation period on fee arbitration requests -- two-years from the last date the work was conducted by the attorney. All secretaries are advised, however, to be "liberal" with extensions concerning this time frame.

There is a limitation period on fee arbitration requests - six (6) years from the last date the work was conducted by the attorney.

The panel can decline to arbitrate when there is a violation of the two-year limitation period, and when people who are not parties to the arbitration have an interest that would be substantially affected by the arbitration. The committee can also decline when the primary issue in disputes raises substantial legal questions in addition to the basic fee dispute, or where the total fee exceeds $100,000 excluding costs and disbursements.

The Details

Fee arbitration hearings are meant to be informal, and the Rules of Evidence, generally, do not apply. The degree of informality will, of course, vary from panel to panel, but all hearings are held in private and all witnesses and both parties are sworn. No record is made of the proceedings except in exceptional circumstances, and all documents are details of the hearing remain confidential. Both the attorney and the client have the right to be present at all times.

There is no discovery in the fee arbitration process. However, wit the permission of the secretary, a party may subpoena witnesses and documents to the hearing. The burden of proof is on the attorney to prove the reasonableness of the fee by the preponderance of the evidence. Both sides may be represented by the attorney of their choice.

The price tag for fee arbitration is equally divided between the client and the attorney. Both the client requesting fee arbitration and the attorney responding must pay a filing fee of $50, regardless of the amount of the attorney fee charged.

The rules state that the participants shall be advised of the determination of the committee within 30 days of the close of the hearing. There is an appeal process available in fee arbitration matters, but it is limited. Findings of fact will not be disturbed.

If the committee determines that the client is due a refund, the attorney has 30 days to refund the required monies. Should the attorney fail to refund the funds in the required time frame, the matter is referred to the Office of Attorney Ethics for "appropriate action," which usually results in temporary suspension from practice until the refund is paid.

The Chance to Appeal

The party who wishes to take an appeal has 21 days after receipt of the committee's determination to file an appeal with the chief counsel of the Disciplinary Review Board. The notice of appeal must include a statement of the basis for the appeal and an affidavit or certification of the applicable facts.